From barrier to benefit: How KYC compliance saves crypto users money

Crypto exchanges have started applying situational KYC to fight against illegal activities without compromising user experience and financial freedom.
application demonstrates that it cares about security. By mandating the submission of personal information and documents for verification, the process fosters a safer environment, deterring the misuse of its services for unlawful activities.
KYC also helps control reputational damage that may stem from hacks or data breaches by enabling exchanges to take quick action against suspicious activity.

How does the KYC process work?

The KYC process on crypto exchanges can include several basic steps designed to verify customer identity and assess potential risks of illegal activities:

1. Verification of customer data: The exchange verifies the data by requesting an official document, such as a passport, driver’s license or birth certificate. Some exchanges require users to present official documents accompanied by a selfie.
2. Liveness check: Some exchanges request a liveness check to determine whether the information belongs to the actual existing user.
3. Customer risk rating: Based on collected and verified information, exchanges perform risk ratings for each customer.
4. Continuous monitoring: Transactions and accounts are constantly reviewed to spot some triggers that may indicate illegal activities in a timely manner.

How KYC procedures are implemented may vary depending on exchanges’ specific compliance policies, regulatory requirements and operational practices.

adoption?

Threshold-based or non-mandatory KYC procedures offer a strategic approach to balance global crypto adoption with regulatory compliance demands. Platforms that do not require KYC for small transactions or basic account functions can lower entry barriers for new users.
This approach is particularly beneficial in areas with limited access to conventional banking services, allowing users who value anonymity to participate in the crypto economy while adhering to local regulations.

By carefully implementing mandatory and non-mandatory KYC practices, platforms can protect users from financial risks while promoting broader access and adoption of digital financial services. Changelly previously assisted Europol in tracing the criminals behind the WannaCry hack and aided in locating and returning funds totaling $585,000 to the customers affected by the Bithumb hack.
As we look toward the future, the integration of KYC processes within the crypto ecosystem is poised to play a pivotal role in shaping a more secure, transparent and inclusive digital finance landscape. Platforms that leverage advanced technologies and adopt flexible KYC practices will drive global crypto adoption to new heights.